In the first part of the show, Jason Hartman interviews Mitch Russo, author of The Invisible Organization. Mitch explains Keith Gill’s move with Gamestop and the corruption of Robinhood and Google. Next, Jason talks to Ashley about the connection between sound money and art. Lastly, he welcomes Saifadean Ammous, author of The Bitcoin Standard. Saifadean discusses the three functions of money and how it relates to Bitcoin.
Announcer 0:02
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Jason Hartman 0:53
Welcome to Episode 1642 1642. And there is, as always a lot going on in the world, not the least of which is GameStop and Reddit and hedge fund billionaires who have rigged the economy. As I always say, Wall Street is the modern version of organized crime. The riggers get upset when they get rigged back. So I’ve got my buddy Mitch Russo, author of two great books. Here, just for a quick few minutes with me today, he is about to attend a mastermind meeting that I am actually speaking at, in about an hour and a half. So he’s he’s in a hotel room, but was nice enough to join us quickly, because he is very passionate about what is going on with the rigged economy with rigged financial system with GameStop and Reddit, and AMC and the whole thing you’ve probably heard about it in the news by now. But Mitch, welcome, and thank you for joining us.
Mitch Russo 1:55
My pleasure, Jason. And you know, nothing pisses off the mafia like fighting back. Yeah. And and basically, what we got here is we have the Wall Street elites who basically fell asleep, knowing that they own the world. And all of a sudden, one single Reddit guy decides that he’s going to topple those bastards. Can I say bastards on your show?
Jason Hartman 2:16
You can say it. In fact, we could call them much worse names than that. But
Mitch Russo 2:21
okay, good. Well, let me just make this point. Because it’s so important. No one is really trapped, we are in an illusion of being trapped. And when someone breaks through the illusion and realizes that they can get out of the trap, by turning the game on, the people who are playing it, for us are honest, that’s when we achieve real freedom. In fact, this is so powerful, it’s crossing republican democrat boundaries, because everyone is freaking out. So here’s in a nutshell, as probably everyone you know, knows, the bottom line is that some guy on Reddit started a group. And he started to basically talk about trading GameStop. And to keep buying Long’s keep going long on GameStop. Well, all of a sudden, what ends up happening is that these huge hedge funds with enormous short positions are daily looking at what’s going on here. You’re losing money every day.
Jason Hartman 3:12
Let me before you go on, because I just want to give a little more context to that. So you’ve probably all probably everybody listening has heard the story, or at least an inkling of it, and maybe you don’t know what’s going on. This is hugely significant. Here’s the basic thing. And Mitch, correct me if I’m wrong, you know, much more about the stock market than I do. But essentially, GameStop is sort of a kind of a company that’s probably on the road to failure, something right, you know, times change, e commerce, you know, everything’s changing, right? They got a bunch of retail locations, very expensive to maintain. And so they did have a decent amount of cash on hand to kind of sustain their operations. And so the hedge funds thought, you know, this is a company that’s going to go under, let’s short the heck out of it, right. And then a bunch of people in a group called Wall Street bets, what’s called a subreddit, within the Reddit website, where people talk and it’s democratic, right, people are talking amongst themselves, individuals, just thinking about what they want to do. And I guess, what’s his name? Peter, Gil, is that the guy that heads the group? Maybe maybe? I don’t know. I don’t know. Yeah. But anyway, he’s sort of led the charge. And he’s an interesting character I’ve read about him. He said, Why don’t we go long on GameStop, which is the opposite of the shorts. So this is a war, a tug of war between them. In those shorts, the those hedge fund billionaires that have been shorting it, they use a lot of leverage to do those shorts, right. So when it works in their favor, it’s a beautiful thing and they make a fortune. But when a bunch of people start buying the stock and going long on the stock, that is the opposite bet. And what happens then Mitch,
Mitch Russo 4:58
well, first of all, let’s be clear. There is no intrinsic value in in the stock itself. Although the company made a profit last year small profit, yes, they were at 1.7 billion. Now they’re down to 4 billion and they still generated a profit. And they were hoping to find your way out. But this, of course, changed the game for them. Now they’re now they’re thrilled. Now they got all this cash they’d ever thought they’d have. But he, here’s what’s going on. In a nutshell, the people who are buying the stock, have no knowledge of stocks, have no knowledge of the stock market have no intrinsic value understanding, they don’t care, they are being they’re being rallied to put money. And some people are putting like $50. You know, there are people out there. And the stories, as you know, are amazing. People have already saved their grandfather from you know, from a nursing home, others have paid off their college loans. This is a liberation of the people using money from these billionaires hedge funds, and it and it hurts. And guess what? They don’t like it. So here’s what’s going on. And this is some of the latest developments. Of course, game stops, ratchet up ratchet up ratchet up. So what ends up happening I heard this morning, you know, these are smart people, these hedge fund operators, they say, Well, wait a second, we’re playing on the wrong side of the table here. Why don’t we get into the game? Why don’t we actually start bidding the stock up ourselves. And then once we bid it up, then we crash it, and we flush everybody out,
Jason Hartman 6:21
which is basically what Goldman Sachs has been doing for decades, but and
Mitch Russo 6:25
to all of us. I mean, this is every time you put money into a mutual fund or any form of a major stock index, what’s happening is that these companies are mature, basically, completely manipulating all of these instruments, to their benefit, not to yours. And that’s what this whole idea, this movement of return power to the people by this Reddit guy has been all about. And
Jason Hartman 6:50
man, by the way, I found his name. It’s Keith Gill, he’s 34 years old, he lives in Boston. And he’s the redditor, as they say, leading the charge on the wall street bets subreddit. And yeah, so he’s, he’s the guy doing it. And the SEC is looking into whether or not he broke any laws, of course, and guess who the SEC will be influenced by, of course, the hedge funds, right? But it looks like this guy was simply voting with his money. He bought his position. And all he did is advocate his position, which is fine, right?
Mitch Russo 7:24
That’s right. Except the problem now is that the trading platform, one of them called Robin Hood, which is very popular among millennials, because it’s free to trade. But as you know, you said this a million times when anything is free. It’s you who’s the product, right? It turns out that they had been selling their dealflow. Back to their their hedge fund cronies. This is Robin Hood. And basically undercutting undermining all of the investors that have been investing in Robin Hood. Well, guess what? Now they have to pony up billions more to cover the cash needs of Robin Hood. So what did Robin Hood do? They basically broke their core tenant, which is to stop traders from trading. So they basically clamped down and said, Okay, sorry, even though you have it in your account, you can’t sell it, and you can’t buy more. So now these guys were trapped. Well, of course, they went to Google, they filled out, you know, complaint forms on Google and Google reviews 100,000 reviews were deleted by Google, you know?
Jason Hartman 8:21
Okay, so So that one is so basically all the Robin Hood customers, the people again, this is the people versus the corrupt institutions, basically that’s what this story is about. And, and they went and they wrote Reviews on Google complaining about Robin Hood, and then Google the big disgusting tech company deleted the reviews the negative reviews, which were legitimate negative reviews because Robin Hood halted the trading and guess what else? The the one of the big investors in Robin Hood also runs a hedge fund called what Citadel? Right? And, and he’s a big investor in Robin Hood, and then runs a hedge fund that is holding a position that is getting crushed. Go ahead. Let’s expand on that.
Mitch Russo 9:08
So now So Steve Cohen comes at, you know, one of the founders of Citadel comes down says, Why are they picking on us rich people?
Mitch Russo 9:14
I loved it. It
Mitch Russo 9:15
was so great. Is it a poor rich people? I’m so sorry. We,
Mitch Russo 9:20
you know,
Mitch Russo 9:20
I hope you don’t lose one of your five mansions on the beach in Florida. I mean, that’s not a problem. So Okay, so here’s, here’s what’s happening now. So as of right now, it looks like the stock is crashing, which which again, is possibly in this is good in a way because now we’re starting to see the the what I would call the easy money flush out. What’s going to happen though, is according to the what’s on the Reddit thread is that they are going to keep pushing it higher and higher and higher. And now with the actual hedge funds themselves in the stock, they’re actually going long on the shares that they’re short for. They’re actually taking advantage now of some of these things. increase in value. It’s a very interesting story. And it’s still unfolding, but it is.
Jason Hartman 10:05
and Mitch, we really appreciate you taking the time. I know you’re rushed to get to your meeting to, to just share some of this insight with us, because I know you’re very passionate about this. I want to say one more thing to people. Just as an interesting, it’s not an aside, but it’s interesting to know, what do you think is happening with the CEO of GameStop? Well, guess what his name is George Sherman. He took the job in tooth in April of 2019. So he hasn’t been there that long. And he left a company that was a reseller for Verizon Wireless, right. And he goes there. And he takes a relatively small CEO salary for public company, a million bucks a year, he gets right. And he was awarded $2 million, or just over $2 million in share grants and options. And those were initially valued at 10 and a half million dollars. But as of Friday, they were worth over $900 million.
Mitch Russo 11:01
Yep, I mean, you know, go sell cell phones at the mall. Next day, you’re CEO of a public company. Look, I mean, what is he 12? I mean, how much experience does this guy have? Of course not. And that’s the that’s the point. You know,
Jason Hartman 11:12
it’s just amazing. But again, that just close out Mitch with just expand on the idea of the people versus the institutions here. And you know, this is so such a parallel to what happened in our phony corrupt election, what’s happening with, you know, the way the virus is being played out the way the vaccines are being played out. It’s like, everything is rigged. Nowadays, just everything is rigged.
Mitch Russo 11:41
Everything is rigged. And here’s the here’s the thing, if it weren’t even playing field, anybody could go on to Robin Hood, anybody could buy or sell shares. Any I mean, look, they have a right to clamp down on margin margin is loans. They have a right to do that. And they have, but what they don’t have a right to do is restrict selling and restrict buying and restrict trading. That is what’s going to eventually be their demise. Unless, of course, it’s so rigged, that even the SEC, as you said earlier, it goes along with it said, well, they were just protecting themselves around look that we are exposing the underbelly of basically all of the financial systems here, we’re basically showing, it’s showing us that we never really ever had a fair system. And if you’re not careful, you can get swallowed up and thrown in the garbage because you’re on the wrong side of a trade. That really could have been a good trade if they wouldn’t have done what they do. Now, just to be clear, this has been going on since the early 1900s. This isn’t new, but it’s gotten bigger, and it’s gotten louder, and it’s gotten more powerful with technology. And now most people didn’t realize now they do now they’re seeing
Jason Hartman 12:46
what’s going on. Yeah, and thank you for that. That is so true. One thing we did not say also that I think is super important is that we all know about the big tech censorship that’s just absolutely appalling, disgusting, awful, pathetic, that’s been going on lately with the election and you know, the fake fact checkers that don’t know anything, you know, and all this kind of stuff. But But this also was a victim of that. Because Reddit, I guess, shut down the wall street beths subreddit for a while. And there are other censorship issues going on? Do you want to comment on that real quick? Well, they
Mitch Russo 13:24
shut it down for 30 minutes, then they brought it back up to their credit. And it’s still running right now. And I don’t know if you can get in I may have closed it to new members. But it The problem is, of course, is that when when the you know, the ruling powers control everything, they control the freedom of speech on every level, including, as we’ve seen with parlor servers. So right now we have Amazon shutting down parlor we have we have Apple taking the app out of the store. I mean, when you will Facebook, all the rest Twitter, when you have a monopoly like this, that basically no one has power but but the owners of those companies that are being basically led by by the politicians, then you really lose all freedom. And this goes back to my entire conversation about how the constitution was originally created to probe to protect us to protect the citizens from the government. And guess what ain’t happening.
Jason Hartman 14:20
Yeah, yeah, Mitch, thank you so much. You want to give out your website, you’ve got two great books, you you teach business. And you know you you had a company with Tony Robbins and Chet Holmes years ago and have just a wealth of experience in the software field and so forth. You want to share a website?
Mitch Russo 14:36
Sure. Go to Mitch russo.com to learn more about me.
Jason Hartman 14:38
Excellent Mitch Russo. So thanks for joining us. So we are going to get to Saifadean Ammous. And he is the author of the Bitcoin standard, a fantastic book. This is a long interview, so he’ll be back with us on Wednesday. But I’ve got my friend Ashley here and she is a connoisseur Fine Arts and Culture and she’s an opera singer. So you know, that’s, that’s good. But here’s what we wanted to say yesterday, we went to the Norton Museum in Palm Beach. And before that we had listened to an audio clip from the Bitcoin standard. And we will have the author here with us in just a few minutes. And I thought you should hear some of this and hear about what we saw yesterday. And this amazing connection that the author makes between sound money, and culture, and innovation and art, and why great art doesn’t really happen very often nowadays, in an era of unsound money. Do you want to first talk about Banksy and that auction?
Ashley 15:51
Well, there was in 2018, there was a painting by Banksy and he built into the frame of this painting a shredder or paper shredder, paper shredder. And so as soon as it was sold at this auction for 1.4 million, the painting shredded itself. And now consequently, it’s more valuable.
Jason Hartman 16:11
Yeah. And this actually was a pretty good given, you know, but but here’s one for you, that you probably heard about in the news, the banana with duct tape on a piece of canvas for $120,000. I mean, this is
Ashley 16:27
So what makes that art who decided that this is this is art, and I don’t get it. So does that make me any less? Yeah, I’m just gonna say I don’t get it.
Jason Hartman 16:36
So Saifadean, who you’re going to hear from in just a moment, basically says, Well, he makes this connection between fiat money and culture and innovation. He talks about inventions and how, during sound money, arrows, we had incredible inventions. We think we have that today. But we never know what we never know. And will never have the answer of compared to what, right? We never have that. Because it’s always an unknown because we can’t hear the dogs that don’t bark. How much better would innovation be today? How much better would technology be today? If we were in a world of sound money? And here’s the basic concept. And I’ll have you hear a clip from his book. And then we’ll get to the interview, of course. But the basic idea is that when you have sound money, you have a long time preference, meaning that since your money doesn’t depreciate in value with inflation, you know what to expect in the future. When you have unsound money when you have fiat money, when the money is constantly being debased by inflation, you don’t know what to expect, and therefore you make bad investment decisions. And so art and technology and innovation, just like everything else has to be financed. Right? And so the meta g family that we’ve talked about, recently, basically financed Michelangelo’s work, right, and Buddha leschi,
Ashley 18:11
they they commissioned many works of art and buildings and which are architecture, certainly an important form of art.
Jason Hartman 18:18
Well, you know, I believe it’s the most important form of art, music being number two, and fashion being number three, you’ve probably heard me say that before, but they had to have sound money, to be able to invest in something and finance something and wait a long time for the return. So didn’t it take Michelangelo like four years to do the Sistine Chapel? Right? At least? Yes. How long does it take to stick a banana to a wall
Ashley 18:44
with duct tape?
Ashley 18:45
At least four minutes? Well,
Jason Hartman 18:48
probably not even four minutes. Come on. Let’s try to do our own.
Ashley 18:53
So be very careful, the placement is essential.
Jason Hartman 18:57
So the idea is you get these contemporary artists, I’ll say in quotes, and they make this dumb art that isn’t art. And then if they have a snooty attitude, and if everyone they’re talking to and lecturing, doesn’t get it, right, then they’re the idiots but, you know, we really know who the idiot is. It’s the artist, right? So just listen to this quick clip, and then we will get to the interview,
Ashley 19:25
flourishing the contributions of sound money to human flourishing and unrestricted to scientific and technological advance. It can also be vividly seen in the art world. It is no coincidence that Florentine and Venetian artists were the leaders of the Renaissance, as these were the two cities which led Europe in the adoption of sound money. The Baroque, neoclassical, romantic, realistic, and post impressionistic schools are all financed by wealthy patrons holding sound money, with a very low time preference and the patience to wait for years, or even decades for the completion of masterpieces meant to survive for centuries.
Jason Hartman 20:00
So, sound money provides the opportunity for people to have low time preference. when money is unsound, they have to have instant gratification. So they have a high time preference, and they want the banana and the duct tape now, and they want to get their money out of it now, right because they don’t know what their money will be worth in the future.
Ashley 20:24
The astonishing domes of Europe’s churches built and decorated over decades of inspired meticulous work by incomparable architects and artists like Filippo Bruna, leschi, and Michelangelo, are all financed with sound money by patrons with very low time preference. The only way to impress these patrons was to build artwork that would last long enough to immortalize their names as the owners of great collections and patrons of great artists. This is why Florence’s muddy cheese are perhaps better remembered for their patronage of the arts than for their innovations in banking and finance, though the latter may be far more consequential. Similarly, the musical works of Bach, Mozart, Beethoven and the composers of the Renaissance, classical and romantic areas, but to shame today’s animalistic noises recorded in batches of a few minutes churned out by the tongue by studios profiting from selling to man the titillation of his basest instincts, whereas the music of the Golden Era spoke to man’s soul to awaken him to think of higher callings than the mundane grind of daily life. Today’s musical noises speak demands most based animalistic instincts, distracting him from the realities of life by inviting him to indulge in immediate sensory pleasures, with no concern for long term consequences, or anything more profound. It was hard money that financed Bach’s Brandenburg concertos. While easy money financed Miley Cyrus is torques in times of sound money and low time preference, artists worked on perfecting their craft, so they could produce valuable works in the long run. They spent years learning the intricate details and techniques of their work, perfecting it and excelling and developing it beyond the capabilities of others. To the astonishment of their patrons and the general public. Nobody stood a chance of being called an artist without years of hard work on developing their craft. Artists did not condescendingly lecture the public on what art is why their lazy productions took a day to make our profound. Bach never claimed to be a genius or spoke at length about how his music was better than that of others, instead spent his life perfecting his craft. Michelangelo spent four years hanging from the ceiling of the Sistine Chapel, working for most of the day with little food in order to paint his masterpiece, even wrote a poem to describe the ordeal. I’ve grown a goiter by dwelling in this den as cats from stagnant streams in Lombardy, or in what other land they have to be, which drives the belly close beneath the chin. My beard turns up to heaven. My name falls in fixed on my spine by breastbone visibly grows like a harp, a rich embroidery, but use my face from brush props thick and thin. my loins into my palms like levers grind by butter like a Cropper bears my weight. My feet unguided wander to and fro in front my skin grows loose and long behind. by bending it becomes more taut and straight crosswise I strain me like a Syrian bow. What’s false and quaint, I know must be the fruit of spinning brain and die for you looking
Ashley 23:06
for our thumb,
Ashley 23:07
then Giovanni try to sucker my dead pictures and my fame since foul ly fair. And painting is my shame. Only with such meticulous and dedicated effort over many decades to these geniuses succeed in producing these masterpieces immortalizing their names as the masters of their craft. In the era of unsound money. No artist has the low time preference to work as hard or as long as Michelangelo or Bach, learn their craft properly, or spend any significant amount of time perfecting it. A stroll through a modern art gallery shows artistic works. Production requires no more effort or talent.
Jason Hartman 23:40
We got to have you here this part. But so you see you understand that the sacrifices that were made for art in the past, right, and these great artists didn’t have to explain that their art was great. It spoke for itself. Whereas nowadays, and there are good artists nowadays certainly lately. Yeah. But a lot of it is just pure junk. It’s the banana and the duct tape.
Ashley 24:03
But you’re told
Jason Hartman 24:04
it’s a great work of Yes, because and if we don’t get it, and we don’t see the brilliance of the banana with the duct tape, we’re the idiots right? We’re told, maybe idiots. Yeah, but of course that’s not true. And I want you to think about this with the era we just experienced of the censorship of the election, or when something is posted on social media and you get some fact checker warning. We’re being told we’re wrong. But that’s very debatable if you ask me. Anything
Ashley 24:34
I agree, can be mastered by a board six year old. modern artists. I’ve replaced craft and long hours of practice with pretentiousness, shock value, indignation and existential anxiety as ways to cow audiences into appreciating their art and often added some pretense to political ideals, usually of the pure aisle Marxist variety, to pretend play profundity to the extent that anything good can be said about modern art. It is it is clever in the manner of a prank or practical joke. There is nothing beautiful or admirable about the output or the process of most modern art, because it was produced in a matter of hours by lazy talentless hacks, who never bothered to practice their craft. Only cheap pretentiousness, obscenity and shock value attract attention to the naked emperor of modern art, and the only long potential diatribes shaming others for not understanding the work give it value. As government money has replaced sound money, patrons, but low time preference and refined tastes have been replaced by government bureaucrats with political agendas as crude as their artistic taste. Naturally, then, neither beauty nor longevity matters anymore, replaced with political traveling, and the ability to impress bureaucrats who control the major funding sources for the large galleries and museums, which have become a government protected monopoly on artistic tastes and standards for artistic education,
Jason Hartman 25:50
free competition between them. So think of the National Endowment for the Arts and all the controversy that has happened over the National Endowment for the Arts and you know, the accusations that they’re promoting pornography and all kinds of tasteless junk, right. And it’s just this is pretty interesting, I guess we’ll sum it up to say, it’s all about time preference. And the author goes into innovation and talks about some really interesting things about progress and human achievement, not just artistically like we’re talking about now. But overall, in every area of life, and how this just impacts us in so so many ways. So Bitcoin is a highly speculative asset, okay? It could be worth zero tomorrow, who knows some of the promoters say it could be worth an absolute fortune, nobody really knows yet, because it’s only about 11, just over 11 years old now. So we don’t know. But the concept, regardless of Bitcoin itself, is fascinating, the idea of time preference. And remember, I’ve said to you a lot over the years, about the basic to decisions every human faces all day long, all the time. And that decision is habit now have the easy, quick thing, or delay gratification for some bigger thing in the future. Those are basically the two big decisions we’re always evaluating throughout our day, you know, do I eat this piece of cheesecake? Or do I go to the gym? Right? That’s a decision right? Or, you know, do I do I have the chocolate bar or take a walk and have some vegetables or avocado or something, right? These are always the decisions between the long term and the short term. And that a lot of this plays into our mentality. And we don’t even realize it, because of this time preference created by fiat money, when in the old days, we used to have sound money that would allow us to have a long time preference. Just imagine this, imagine you could take a $100 bill, and you could stick it in an envelope, hide it in your house, and in 10 years, or 20 years or 30 years, it would still have the same value versus that value. And for example, in the 30 years, and that inflation into step instruction example that I give in 30 years, that 1970 $200 was only worth $24 at the end. So you have to have a high time preference. In an era with unsound money. When the money is sound, you can delay gratification more effectively, and make better art, better innovation, better technology, better decisions that aren’t full of now investment. So that’s the concept. And let’s go to the interview. Unless you have a closing thought.
Ashley 29:02
You’re gonna want to eat that banana right now.
Jason Hartman 29:04
I think that is probably spoiled. And watch out for a paper shredder embedded in any of your picture frames of your modern art, right? Yeah. All right. Here is the interview with Saifadean Ammous, author of the Bitcoin standard.
It is my pleasure to welcome Saifadean Ammous. He is the author of a fantastic book that I just finished and really, really enjoyed. It was one of the best economic books I have read. And it is entitled the Bitcoin standard. And he’s got a new book coming out with a fascinating thesis as well about fiat money, and really what it does to our culture and to our thinking, and how it maybe impacts morality. I’ll let him tell you about it, but it’s a it’s a fascinating thesis. So safe welcome. How are you?
Saifadean Ammous 29:57
I’m very good. Thank you for having me.
Jason Hartman 30:00
Good, it’s good to have you on so safe. Tell us a little bit about what brought about the book, the Bitcoin standard, you know, it seems as though you really spend maybe the first half of the book, talking about what is money explaining economic concepts. And then the latter part, you talk about cryptocurrencies. But in the beginning, you know, let’s just give people some background, because there are some interesting fundamentals that I think are just really important to understand to grasp this entire concept.
Saifadean Ammous 30:32
I think the book came out after having spent several years looking at Bitcoin and thinking about coming up with ways of analyzing it, which had gotten me some very small degree of prominence in a very small circle of Bitcoin Twitter users. And essentially, you know, I had developed all these ideas about what Bitcoin means and the significance of the economic meaning of, of Bitcoin over time. And then, you know, I was I was arguing about people with it on the internet all the time. And then, really, my wife basically told me, you know, you shouldn’t be doing something more productive than just arguing with people on the internet. So I decided to write this down into long form, you know, every time I would be tempted to answer someone online and just decide, you know, what, let me just go write a couple of pages in the book. And in that sense, I just kept on developing this until it became a whole book. And it became a full vision of how I understand economics a bit. And the title came toward the end. But I think it was a quite fitting title, because the whole book is what the book makes a lot of analogies to gold and the gold standard. And so the point that I’m trying to communicate is that Bitcoin is effectively our new gold standard, it could have the potential to be our new gold standard.
Jason Hartman 31:56
When you look at money. I mean, money really is supposed to Well, there’s also distinction, of course, between money and currency. And maybe you want to go into that. But money really has sort of three basic functions, right?
Saifadean Ammous 32:10
Yeah, generally, people think about the three basic functions of money as being the medium of exchange, a store of value and the unit of account. In my book, I focus in the analysis on the function of a store of value, because in my mind, I think this is the one that ends up giving monetary choice and the monetary roles, the ends of deciding the monetary role just because of how economics really works. If you store your money in a thing that is easy to produce, then that thing will lose value over time, and you won’t have a lot of money. So the money that is stored and things that are hard to produce, on the other hand, will hold its value quite well, and will maintain its value. So over time, it will stay the same or increase. So the net result is that over time, money and wealth tends to concentrate that accumulate in the hands of the people who are holding the hardest money. And eventually, everybody else learned that lesson. And so you end up with the hardest money dominate. And that’s generally been the history of money.
Jason Hartman 33:12
So, of course, paper, fiat money, dollar bills, euros, whatever, in in paper form, especially, are very easy to produce. It’s simply running the printing press. And gold is hard to produce, right? It’s hard to get gold out of the ground, it’s very costly to do it. It’s rare. And then of course, Bitcoin is mathematically rare, right? Absolutely.
Saifadean Ammous 33:38
I think the most interesting monetary property of Bitcoin that I discuss in my book is that this is the first thing that we’ve ever invented. That’s a liquid asset, but also strictly scarce. There’s no way of making more of it. There’s no way of making more Bitcoin than what the Bitcoin code stipulates. And that’s why over the last 12 years, Bitcoin has grown exactly according to the schedule of all the supply as it was laid out before, there’s not been any single person anywhere who’s managed to find a way of making more Bitcoin than what the schedule has. And I think that’s absolutely unique, because it’s the one supply is the one good whose supply is completely irresponsive to demand, you know, no matter what happens with demand, the supply of Bitcoin will not respond, it’ll just always produce the pre programmed amount that needs to be producing
Jason Hartman 34:29
our client, Keith Gibson referred you to the program, and I’m very thankful to him for for asking you to come on the show. And he had a question he said, Could you explain how Bitcoin acts as a base layer money similar to the central bank settlement layer, and how that ties into the criticisms of bitcoins low transaction per second, compared to say MasterCard or visa, so, you know, or PayPal so You talk in the book and I remember this, about how Bitcoin is actually inefficient. People like to talk about how the blocks chain is efficient, but you know, it’s really not very efficient. Right. But it’s very, that that’s one of the things that makes it very secure. I think. Maybe I’m not saying that reliable, not efficient. Yeah. Good. Tell. Tell us more about that in this base layer question that Keith has.
Saifadean Ammous 35:22
Yeah, I think, you know, before before my book was published, there was a the predominant view on Bitcoin was that Bitcoin was some kind of new PayPal, new visa, new MasterCard, new Western Union, it was going to disrupt banks, it was an alternative to banks, you can be your own bank, you can have your bank in your own pocket. And this was, you know, this was generally how people viewed Bitcoin. And based on this, people thought that you know, the, the, the limited the main criticism of Bitcoin and the main limitation of Bitcoin was that, well, Bitcoin can only do so many transactions, but you know, Visa does 5000 times as many transactions as bitcoins maximum capacity. So Bitcoin has no chance of competing with visa. And my book made the case that Bitcoin does not compete with visa. Bitcoin, you know, Bitcoin and visa are like petrol and cars, and they’re not competitive or goods, they need each other to function and you can’t have cars without petrol. And so my point is that Bitcoin is not a payment network, it’s not comparable to PayPal or visa. Bitcoin is more comparable to Central Bank settlement layers. Bitcoin is more similar to the national central banks and the national currencies that Visa, MasterCard, PayPal, used to settle their transactions with others, with other financial institutions or with their clients.
Jason Hartman 36:44
So what would those be the SDR, the special drawing rights?
Saifadean Ammous 36:49
Well,
Saifadean Ammous 36:52
I mean, mainly its national currencies, is what Bitcoin replaces. So the subtitle of my book is that the Bitcoin standard, the decentralized alternative to central banking, and that’s the point is that it is, you know, Bitcoin does not compete with banks, and it does not compete with payment processes. Bitcoin will need banks and payment processes built on top of it. Bitcoin competes with the settlement layer behind banks and payment processors, but it offers companies like PayPal and like visa and like MasterCard offers them a monetary standard that they can use without having to resort to central banks. It’s, it’s the only alternative that financial institutions around the world and individuals have to central banks, because you can now settle payments internationally, without having to go through a central bank, which means it’s no longer a political question is just a purely technical question that you need to solve. It’s, you know, you put in the private keys and your money travels across national borders, which is something that could not happen before, you know, before the invention of Bitcoin, if you wanted to move money internationally, you have to go through central banks, that was the only mechanism for money transfer Bitcoin offers offers us an alternative to that. Okay,
Jason Hartman 38:07
so I think that’s a good segue to just maybe telling you a little bit about my evolution in this, because I think it will address some of the skepticism that people have out there. You know, I started hosting a show called the crypto cast several years ago and expressed some of this skepticism very openly. So I learned about Bitcoin when it was $74. And, of course, have many regrets now. So first to say that, and, you know, for a long time, I just didn’t get it. Right. I didn’t understand it. And I, you know, some of my skepticism that’s still remains is this. I believe the two most powerful forces in the world are governments and central banks. They have standing armies, they have their cartels, they they just run the world, largely. And, you know, their product is currency that is their widget, right? Just like if, you know, I’m in business, and I have a product I sell and you know, someone else’s in business, they have a widget they sell, and they don’t like competition, right. So why would they let this exists? And I know, you may well say there’s an argument that they can’t do anything about it. Okay, great. I, you know, and I’ve always said safe, I’d love to be wrong about this, because my libertarian side says, I would not love nothing more than to see a decentralized currency controlled by the people, not the central banks and governments flourish. Because so much of our lives are controlled by the fiat money. We’re all we all become puppets on the strings of inflation, deflation, velocity, etc. and capital controls, economic Berlin walls. So I don’t like any of that. But you know that that’s kind of my little Now when I got I purchased, I bought into the market when it was about $800. And then I bought a lot more when I saw Michael Saylor. And massmutual, getting into it and putting hundreds of millions of dollars. And I thought the institutions get into it, you know, the big governments and central banks probably aren’t going to screw over the institutions, but they’ll screw over the little people. Right. That was that was kind of my my thinking. So there’s a lot for you to chew on there. But what do you think?
Saifadean Ammous 40:28
I mean, I think that was that was also my initial impression about Bitcoin. And the reason I was late to Bitcoin is that I spent a lot of years just thinking where well, you know, I don’t want to be holding it when they crack down on it and start throwing people in jail for it. Yeah, yeah, maybe
Jason Hartman 40:43
they make it illegal, right?
Saifadean Ammous 40:45
Yeah, make it illegal, or, you know, it’s not something you want to do. You know, there’s a lot of people have gone into jail for doing things that threaten banking monopolies. So it’s no joke, he would think that this would be far more seriously persecuted. But by 2013, it became clear that there was something a little bit different about us, there’s just not going to go after it very directly. And I think, in my mind, the turning point was when the Silk Road website was shut down, and its owner was arrested, or its alleged operator was arrested in 2013, early 2013. In my mind, this was going to be the end of Bitcoin, I’m in my mind, this was the scenario that I had for why Bitcoin would end, you know, they would find a website like that, and they shut it down and then say, Well, this was enabled by Bitcoin. And so if you hold Bitcoin, you are a criminal, you know, then everybody’s going to dump their Bitcoin and the price of bitcoin is going to crash. And that will probably be end of the experiment, because it won’t be able to recover because you know, the damage. It’ll have this bad perception that it’s used by criminals and terrorists,
Jason Hartman 41:59
which interestingly, and you actually point this out in the book, that it’s actually a terrible thing for criminals and terrorists, because it is not private Contrary to popular belief, it is traceable on the blockchain. Right. So, you know, we should dispel that myth that some still believe but go go.
Saifadean Ammous 42:17
Yeah, it’s, it’s quite easy to make mistakes that make you easily trackable, it’s not very easy to not be tracked. It’s not easy to be anonymous on Bitcoin, because non anonymous network is synonymous network. And it’s always possible, somebody could, well, not always possible, but I mean, it is possible that your identity could be identified. So I think what what was interesting was that after that website was closed down number one, Bitcoin did not crash. In fact, Bitcoin recovered and rallied from that. The from after that in over the next six or seven months, it, it went up tenfold and price after what should have killed it, in my estimation at that time. And the other thing, which I found extremely interesting was that there was no direct prosecution of Bitcoin. In fact, in 2013, when Bitcoin started going mainstream, and US companies started offering it as a service. And it became legal. You know, it didn’t become legal. It was never illegal, though. It became increasingly mainstream. I mean, obviously, nowhere near as mainstream as it is right now. But up until 2012, you know, you could have, you could have been forgiven for thinking that Bitcoin was mainly for people to buy drugs online, because that was the thing that most people had heard about when it comes to Bitcoin perform by 2013, that had begun to shift a little bit. And then, obviously, it has shifted much more. But what I think is interesting is that in 2013, and 14 is when this idea started to clear to me that you know, what, maybe they’re not going to manage just because this is just a far more advanced form of technology than what we have. And, you know, I’m sure some individual governments will ban it, but I started thinking of it as Bitcoin is like gunpowder. And, you know, when gunpowder came out, gunpowder was massively destructive to the existing armies. If you had an army that did not have gunpowder, and then another army had gunpowder, well, your army is basically no more because the other army can just take them all out from long range, before your army could even take out a single sword. So, you know, when gunpowder came about governments didn’t matter, that government sought to get it and I see something similar developing with Bitcoin, in that once people begin to understand the value proposition of Bitcoin, rather than want to attack it, they start wanting to acquire it. And so, one interesting I think, turning point was that the prosecutor in the Silk Road case or the investigator in the Silk Road case, they could have taken the path of recommending that, you know, we go after Bitcoin itself, instead, they ended up becoming Bitcoin. miners themselves and even work in the Bitcoin space right now when we see this over and over and over again once you get a taste of bitcoins incredible potential. It’s almost like Bitcoin caught off to do its purposes you know, suddenly you have just been bitten by the bug and now you’re just like all the other Bitcoin victims you’re just you know, thinking about it and thinking about how to serve Bitcoin and how to further Bitcoin because that’s it. You’ve been, you’ve been bitten.
Jason Hartman 45:32
This will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes, be sure to check out the show’s specific website and our general website Hartman media.com for appropriate disclaimers and Terms of Service. Remember that guest opinions are the rain. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
